Colorado's new hospital price transparency law adds 'real teeth' to weak federal enforcement, experts say

With much of the hospital industry still falling short on federal price transparency requirements, experts say a new Colorado law targeting a key source of hospital revenue could be a roadmap for other states interested in boosting compliance and containing high prices.

The bipartisan “Prohibit Collection Hospital Not Disclosing Prices” was signed into law by Colorado Governor Jared Polis in June and went into effect Wednesday.

It prevents hospitals or their collectors from initiating or pursuing debt collection from a patient if the hospital’s website was not in compliance with the Centers for Medicare and Medicaid Services (CMS)’ price transparency requirements at the time services were delivered, according to the bill’s text.

Patients may file a lawsuit if they believe a hospital was not compliant when pursuing debt and, if found to be correct in court, will see their medical debt and legal fees covered by the hospital, according to the bill.

“This Colorado requirement can actually bite. No hospital wants to have its debt-collecting ability constrained and their cash flow hurt,” Ge Bai, a professor of practice at Johns Hopkins’ business and public health schools who researches hospital finance and policy, told Fierce Healthcare via email.

Of note, the new bill does not prevent hospitals from billing for their services or require them to refund payments already made. Additionally, critical access hospitals will have until Feb. 15, 2023, to come into compliance before having their ability to collect debt restricted, per the bill.

“People deserve to know what all their medical bills will look like and finally we will have better price transparency which is needed for the market to work better in health care and empower patients to take control of their own healthcare needs,” Polis said in an Aug. 5 statement.

CMS’s price transparency rule required hospitals to post a comprehensive machine-readable list of their services and prices as well as a patient-friendly tool to help shop for 300 common services since Jan. 1, 2021.

Noncompliant hospitals receive a warning and a request for a corrective action plan from the agency and, if necessary, civil monetary penalties up to $300 per day and a public name-and-shame on CMS’ Hospital Price Transparency website. To date, just two hospitals have been issued penalties.

Despite that monetary penalty being raised from its first iteration, compliance has not been the norm.

A new report released Tuesday by nonprofit price transparency group found just 16% of a 2,000-hospital nationwide sample was in full compliance with the rule while 5.1% were in “total non-compliance.” This is up slightly from the 14.3% compliance rate reported by the group back in February.

Reached via email, founder and chair Cynthia Fisher said compliance was even lower in Colorado and commended the state’s leadership for “adding real teeth” to CMS’ requirements.

“Unfortunately, this legislation is necessary, because the majority of hospitals—84% nationally and 97% in Colorado—continue to flout the law by keeping their prices hidden, and federal enforcement has been weak at best,” she said. “Where the federal government has failed, Colorado has stepped in to protect patients, employers and unions, giving them power to see and compare upfront prices. We encourage other states to follow Colorado’s lead."

Hospitals and health systems have said their adherence struggles are the result of the high cost and complexity of implementation. They’ve also pointed fingers at the rule’s language, which they say is vague and difficult to interpret.

Ishra Solieman, a counsel with Denver-based lobbying and law firm Brownstein Hyatt Farber Schreck who advises providers on regulatory and compliance issues, said the hospital industry has largely deprioritized the federal requirements in light of the pandemic and its related challenges.

Colorado’s new law, however, will “likely have the effect of pushing hospitals in the state to dedicate the time and resources required to attain compliance with the federal law,” she said in an email.

Barbara Anthony, senior fellow in healthcare at the Pioneer Institute, agreed that CMS’ civil monetary penalties haven’t turned too many heads.

“The problem with fines alone is that a hospital can merely recoup the fines as a cost of doing business,” she said in an email. “But prohibiting collections of medical debt will get the attention of top management and boards and hopefully incentivize greater compliance.”

Still, the legislation’s reliance on individual patients to bring noncompliant hospitals to court, rather than relying on a regulatory agency, leaves some unknowns regarding its practical impact, Solieman said.

“It remains to be seen how often patients will utilize the law to sue hospitals, and in turn, how effective such lawsuits will be at encouraging compliance with the federal law,” she said.

The experts said they expect more states to increase pressure on hospitals and the other industry players subject to new federal price regulations.

This could mean new Colorado-like laws focused on patient rights or debt collection as well as other areas of increased regulatory oversight “such as requiring hospitals to submit relevant information to a state agency rather than just posting information online,” suggested Johanna Butler, policy associate at the National Academy for State Health Policy.

“States are also considering how this data could be used to inform other policies to lower hospital costs, such as using it to monitor hospital rates in and out of network,” she said in an email “… States are paying attention, but we also know large employers are watching closely to see if they can use the data to drive down rising costs. This attention could be another source of pressure for compliance.”

Anthony similarly advised self-funded employers to take an active role in the push for compliance “as transparent pricing can help them and their benefits managers obtain the best pricing for their firms and employees.”

But for Bai, just making the numbers more easily available won’t be enough to push the needle on hospital prices.

“Price transparency can help but it is not a panacea,” she said. “Payers and patients won’t comparison shop unless they believe they can benefit from doing so. Rewards to patients and payers for using low-price-high-value hospitals is needed to realize the potential of the rule.”